Sales dip forces early discounts

Written by Vaishnavi Bala | Mumbai | Updated: Jan 13 2013, 07:42am hrs
Retail chains like Future Groups Central, Tatas Westside and Reliance Trends are advancing their annual discount season by three to four weeks in a bid to maximise sales, although the move is likely to hurt their margins.

Discount season generally begins in the third week of January and ends in mid-February. However, retailers have started offering heavy discounts ranging from 25% to 60% by end December.

An executive at Future Groups Central says early discounts indicate a disappointing sales period.

The focus is to increase sales. Once we get the desired sales number, margins will not be a problem. Since consumer sentiments are just picking up, one needs to give additional incentives, he said.

Last year too, companies extended their discount season, but witnessed a tepid increase in sales, even as margins were hit 5% on an average.

However, most retailers made up for this slowdown in sales with a higher growth of 12-15% in November and December.

Discounts offered this time are mostly on apparel as companies are trying to reduce inventory. International brands like Zara, FCUK, Pepe Jeans, Wrangler are offering discounts between 20-50% on merchandise. Sports lifestyle brands Puma and Adidas are also offering discounts of up to 40%.

Future Groups lifestyle retail format Central is offering discounts up to 51% on its collections, while Reliance Trends is offering a discount of up to 60% on its merchandise since December 22. Westside started offering discounts up to 60% from December 28. This will extend till February 3.

This year, we are already seeing retailers starting on discounts. Right now, their main aim is to maximise sales. They are not worrying about margins. Also, if one retailer starts giving discounts, others naturally follow, says Abhishek Ranganathan, the vice-president at brokerage PhillipCapital (India) Pvt Ltd

One will not see margins expanding at these companies soon. So they are going in for sales growth as they have realised that is the way to grow now, says an analyst with an international brokerage.

But some companies are not following the market standards of giving discounts so early, and will only start it in the third week of the month only like Shoppers Stop Limited.

Govind Shrikhande, the managing director of Shoppers Stop, says the company is looking to steer clear of the extended discounts periods. We want to work on a completely new strategy of discount sale and beat the market. The market has been taking a path of discounts for too long and we don't believe in that, Shrikhande said.